Vickie Wants to Borrow $5,000 for Three Years

question 28

Multiple Choice

Vickie wants to borrow $5,000 for three years.She will repay the $5,000 plus the finance charges in one lump sum at the end of the three-year period.If the lender charges her 12 percent add-on interest,how much will Vickie pay in finance charges?

• A)$600
• B)$1,800
• C)$6,800
• D)$5,600

---

Definitions:

Static DCF Analysis

A method of valuing a project or investment by estimating future cash flows and discounting them to present value using a fixed discount rate.

Option to Abandon

A clause in an investment contract granting the investor the right to withdraw from the project under certain conditions, typically to minimize losses.

NPV

Net Present Value; a calculation that compares the value of money now to the value of that money in the future, taking inflation and returns into account.

Static DCF Analysis

A method of valuing a project, company, or asset using the concepts of the time value of money where all cash flows are assumed to occur at fixed points in time.